EV maker Lordstown plans to sue Foxconn over funding dispute
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FILE PHOTO: Lordstown Motors and Foxconn logos are seen in this illustration taken, May 2, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
(Reuters) - Lordstown Motors said on Friday it plans to take legal action against investor Foxconn to ensure that the Taiwanese contract manufacturer completes a planned purchase of nearly 10% of the electric vehicle startup's shares.
The company, and its EV peers have been struggling as access to capital tightens from rising interest rates and economic uncertainty.
The cash-strapped EV maker had warned earlier it might be forced to file for bankruptcy, citing uncertainty over a $170 million investment deal with Foxconn through which the Taiwanese company would hold a near-20% stake in the money-losing U.S. firm.
It currently holds a little over 8% in the company, as per Refinitiv data.
Foxconn has since invested $52.7 million and is balking at purchasing additional shares, citing a breach of their agreement, Lordstown said.
On Friday, the U.S. company, named after the town in Ohio where it is based, said in a filing it believed Foxconn was unlikely to complete the promised purchase, citing a letter the contract manufacturer sent Lordstown earlier this month, in which the Taiwanese company did not acknowledge the subsequent common closing.
"The company believes that Foxconn's various breaches of the investment agreement and pattern of bad faith have caused material and irreparable harm to the company," Lordstown added in the filing.
Foxconn did not immediately respond to a Reuters request for comment.
Lordstown, whose shares has tumbled more than 80% this year, also said in May it might have to stop making the Endurance pickup truck in the near future unless it finds a partner.
(Reporting by Tiyashi Datta in Bengaluru; Editing by Savio D'Souza and Nivedita Bhattacharjee)
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